Fantastic Update From Union Jack

The long awaited update on the Andrews-1 well has arrived and what could be better than throwing in yet another great deal with Reach, Union Jack’s incredibly pro-active Oklahoman joint venture partner.

People have been posting their frustrations on the bulletin boards, suggesting there were problems at the well head, problems with flowing the oil, probably only 20 or so barrels of oil per day, but no, the Andrews-1 has been producing up to 100 bopd on clean up whilst awaiting the necessary operational equipment to implement a permanent production facility. Yes, up to 100 bopd and worth noting the API has increased to 46 degrees whilst awaiting an electric supply and an upgraded pump. These upgrades will ‘materially enhance’ the present flow rates, so, as stated by David Bramhill in a previous RNS, with wells in the vicinity producing approximately 150 bopd, one could fairly assume we will see this from the Andrews well.

What is even more exciting is that you can now start doing the maths. With approximately 70 bopd to Union Jack equating to in the region of $2,000,000 per annum based on $80 per barrel, the Andrews-2 well is almost certainly going to be producing a similar amount. So excluding the gas production from both of these wells, $4,000,000 per annum into the UJO coffers.

Now, in addition to this much needed and great news, the company has also announced yet another acquisition and joint venture with Reach, an interest in an enhanced oil recovery (EOR) project. For anyone unaware of the way this works, EOR can extract 30% to 60% or more of a reservoir’s oil, compared to 20% to 40% using primary and secondary recovery. In a nutshell, the method of secondary recovery is in which water is injected into the reservoir formation to displace residual oil. The water from injection wells physically sweeps the displaced oil to adjacent production wells. This process is basically a water flood and a visual explanation can be found here

One should note the incredible economics of this operation. Expected revenues in the region of $7,500,000!!! This is as good as free money and when you add this into the ongoing revenue streams, with the UK’s Wressle well also contributing a substantial income, the future is looking brighter even than David Bramhill suggests!

It seems nothing is slowing Union Jack Oil down in its endeavour to build a strong presence in the US. Whilst early days, this year alone has already seen announced and drilled the Andrews 1-17 well, confirmation of the Andrews 2-17 well to be spudded within weeks, the Wilzetta well later this year, the Mineral Royalties which are already producing revenues and of course today’s confirmation of yet another project. One could reasonably expect an Andrews-3 well within the timescales subject to another successful drill.

There are those that find much to criticise, many hanging onto the past in their views of this company and its management, but reality should start kicking in. This company is not resting on its laurels. It is not sitting still as the UK oil sector is slowly being wound down by this government and the intentions of the next, should they achieve power.

Union Jack has taken the bull by the horns and made a wise, astute move into the United States whilst its peer companies struggle for cash and ideas!